Colliton: When aging parents are in need

Much of the furor over parent-adult child relations when it comes to money has focused on the adult child who receives funds from his or her parent. Little attention is paid to the reverse situation, parents who have run out of funds.

As there are fewer defined benefit pension plans, employers contribute less to retirees’ health insurance, and parents live longer, the issue of parents running out of money is likely to intensify.

If this seems unlikely, consider the number of elderly widows, as one example, who are below the poverty line. Having been used to receiving at least two incomes – Social Security from their husbands and for themselves, this figure drops on their husband’s passing since, even if they “bump up” to a husband’s higher Social Security amount, a widow still receives only one check.Combine this with the potential total loss or reduced benefit from a husband’s pension, and the income shift can be dramatic.

Also, if, in addition, a husband had a long and debilitating illness, the couple may have dipped into life savings to pay medical bills. They could have borrowed against their house or taken out a reverse mortgage.

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In an article in Money magazine out this month, Beth Braverman of Money interviewed me on the impact of reverse mortgages. She quoted, in particular, on recent trends making taking out loans a riskier proposition.

“…Indeed, reverse mortgages can be a good option for seniors age 70 or older who are committed to staying in their homes and don’t have the savings to cover their expenses, says elder-law attorney Janet Colliton of West Chester, Pa. However, she adds that recent trends are making the loans a riskier proposition.For one, borrowers are younger…” See “Don’t Tap Your Home Too Hard,” Beth Braverman, Money magazine, December, 2012.

Borrowing against the house with a reverse mortgage at a young age to pay for vacations, a car, or credit card debt or to refinance a mortgage on a property that could not be afforded in the first place are all risky propositions. Still, for some older borrowers, a reverse mortgage can help. An ethical broker, and there are a number of them out there, knows the difference and will steer the right person to the right solution.

Prevention, that is anticipating the bumps in the road and budgeting for them, is the best way to deal with aging out of money.

When this cannot be done and it is too late, the options narrow.

Applying for government benefits is one possibility but there is not as much availability as one might think. Supplemental Security Income (SSI) is a welfare program that brings with it Medicaid for additional health insurance. However, many seniors living in Chester County and surrounding areas would not qualify since the maximum unearned income level ($674 for an individual and $1,011 for a couple with various exceptions) and asset level ($2,000 in countable assets for an individual and $3,000 for a couple not counting the house, car and some other assets) are so low.

Even when received, SSI would be unable to support many unless they have a special living arrangement.Food stamps have an income and asset limitation and elders might consider local charitable andchurch-sponsored food banks.

Applying for one benefit might cause an applicant to go over the line and be disqualified for another so applications must be considered together.

Shared living arrangements are another possibility. Parents can move in with adult children as one example or they might take advantage of subsidized housing if this is available near where they or their children live.

One particularly acute problem arises when a parent fails to recognize or accept that funds are low and wants to continue the same lifestyle as before. Children become especially concerned about this due to Pennsylvania’s filial responsibility laws.

Generally, filial responsibility has been enforced selectively and almost exclusively related to medical, health care, assisted living and nursing home bills. However, I have recently seen several cases where parents continue living and spending as though they have money they no longer possess. This is an especially difficult form of denial to have to confront.

The parent who needs help needs to acknowledge this, to provide relevant information, and to be willing to work with those who are offering help.

Recognizing reality is a good first step. No one can do it all by herself or himself all the time.

For more, listen to “ Planning Ahead” a biweekly radio program on WCHE 1520 every other Wednesday from 3:30 p.m. to 4 p.m. with Janet Colliton, Colliton Law, and Phil McFadden of Home Instead Senior Care.

Janet Colliton is an elder law and estates attorney with offices at 790 East Market St., Suite 250, West Chester, Pa., 19382, 610-436-6674, colliton@collitonlaw.com. She is also, with Jeffrey Jones, CSA, co-founder of Life Transition Services, LLC, a service for families with long term care needs.